KUWAITIS WEIGH INVESTING IN U.S.

KUWAIT — Government financial managers of Kuwait's oil wealth view with favor now a big move toward direct investment in United States corporations that are seeking capital.

“We are studying dozens of proposals for equity investment from American companies, many of them well ‐ known names, and some of these offers look very good,” Khaled Abou Saud, director of investment at the Ministry of Finance, said.

“We are much more interested in long‐term growth investment in productive enterprises than we are in fixed‐interest debt obligations. For this we see the best opportunities in the big American economy and in West Germany. The French are trying hard, but it is narrow, and Britain, with all its union problems, is in trouble.”

Kuwait, a desert country of 900,000 people, has limited domestic investment opportunities outside the petrochemical field for her multibillion‐dollar oil income. Foreign investments are regarded as a sort of pension fund for the day when oil resources decline.

Mr. Abou Saud, a Palestinian by birth who has been made a Kuwaiti citizen for his services here for 20 years, is the chief manager of Kuwait's Government‐owned foreign investments, estimated at $10‐billion. They will probably grow $4‐billion more this year.

He has been the principal negotiator on all large investment deals, such as Kuwait's acquistion last year of 15 percent ownership of DaimlerBenz, the West German maker of the Mercedes automobile, and the $200‐million purchase of the St. Martins Realty Cornpany, a leading London real‐estate developer.

Kuwait has done nothing comparable in direct corporate investment in the United States, but informed financial sources said that portfolio investment in American company shares has been “in the hundreds of millions of dollars” as the stock market has picked up since the start of the year.

But the offers that Kuwaiti officials are now studying with special interest, together with their consultant banks, among them Chase Manhattan, Chemical and Bank of America, are primarily private stock offerings, or share blocks, at fixed prices.

Goal Is Explained

“We have explained to both American officials and our bankers that we are not interested in taking over ownership or interfering with the management of big corporations,” Mr. Abou Saud said.

“What we want is to be able to invest the money which we get from selling oil at a return that is better than if we had left the oil in the ground to appreciate there against inflation.”

United States corporations appear to want to attract Kuwaiti capital for expansion programs when the American economy revives.

Mr. Abou Saud, who knows the United States, Britain and Western Europe well, is not alarmed by outcries against “Arab petrodollar invasion” in the West. He said that most United States and West German bankers and corporate directors with whom he dealt were confident that such campaigns would not be an obstacle to the quiet acquisitions Kuwait sought.

Mr. Abou Saud said that Kuwait had notified the British and West German authorities in advance of the large purchases in those countries. He said he had assured United States Treasury officials that Kuwait had no objection to providing confidential reports of sizable direct investment in American business. “But as businessmen, we feel that confidentiality is important and should be main tained to protect the investor,” he said.

In practice, Kuwaiti purchase of share blocks would probably not be in excess of 6 or 7 per cent of any corporation's voting stock, with the stockholder rights exercised through custodian accounts in United States banks, he said.

Kuwait and private Kuwaiti investors bought the 5,500‐acre Kiawah Island off South Carolina last year for $17‐million. They intend to develop it as a resort.

Kuwait's oil income this year is expected to drop to $7‐billion from almost $9‐billion last year.

Volume of exports, which had declined, has now steadied at 2.1 million barrels daily, largely on long‐term contracts.

This income has fueled a capital market here through a group of investment comganies that have become largescale underwriters of foreign bond placements, primarily through Government purchases.

These placements are expected to total $800‐million this year in foreign bonds and obligations in the five‐to‐sevenyear range.

In February there was a furor in international investment banking circles when the Kuwaiti investment houses refused to enter into underwriting agreements with American and European banks on the Arab boycott list against Israel:

But this appears to have had no effect on the booming business in foreign security underwriting here. In March and April, Kuwaiti investment underwriters participated in 26 new issues valued at $350‐million and were managers or comanagers of 11 of the issues. This compares with 21 issues handled by the same Kuwaitis houses during the first 10 months of 1974, before the boom began here.

The underwritings have spread from mainly Eurocurrency bonds to large borrowings from Eastern Europe, including $40‐million by Hungary and $60‐million by Rumania.

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A version of this archives appears in print on May 26, 1975, on Page 21 of the New York edition with the headline: KUWAITIS WEIGH INVESTING IN U.S. Order Reprints|Today's Paper|Subscribe